The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Image via Wikipedia

Tax policy should be serious business carried out by serious politicians using real facts and figures. This is why we have the Library of Congress and the Congressional Budget Office, among other expert institutions.

How can we take Congress seriously when the Senate Majority Leader, Harry Reid, makes patently inaccurate, outrageous and bizarre claims on an important tax-policy issue without any heads being turned? I guess this is what we have come to expect of Congress. No wonder citizens with favorable opinions of Congress are as rare as unicorns, to borrow a phrase.

Harry Reid’s statement on December 6 on his proposed 1.9 percent surtax on million-dollar incomes has kicked up some dust. Here is his statement:

“Millionaire job creators are like unicorns. They’re impossible to find, and they don’t exist… Only a tiny fraction of people making more than a million dollars, probably less than 1 percent, are small business owners. And only a tiny fraction of that tiny fraction are traditional job creators...Most of these businesses are hedge fund managers or wealthy lawyers. They don’t do much hiring and they don’t need tax breaks.”

In his remarks, Reid cited a National Public Radio broadcast on taxes and millionaire job creators. He particularly singled out the lack of Republican cooperation as stated in the NPR broadcast:

“NPR requested help from numerous Republican congressional offices, including House and Senate leadership. They were unable to produce a single millionaire job creator for us to interview.”

Were it not for Google, I would have accepted Harry Reid’s unicorn story. Unlike Harry Reid’s office, I went to the IRS’s Table 1.4 “Sources of income, adjustments, and tax size of adjusted gross income, 2009” to check things out. (I summarize my sources in a separate blog posting). Here is what I found:

There are 236,883 tax filers with incomes of a million dollars or more. By Harry Reid’s count, only one percent, or 2,361 of them, are business owners, and a tiny fraction of them create jobs. I do not know what Harry means when he says “a tiny fraction of a tiny fraction.” If we let 5 percent represent Harry’s “tiny fraction,” we are left with 118 businesses owners who earn a million or more and create jobs. Yes, they are only slightly less rare than unicorns, if Harry is to be believed.

My Google search for Harry Reid’s quarter million hedge fund managers and wealthy lawyers came up empty handed. I could identify at most sixteen thousand “wealthy lawyers and hedge fund managers,” not Harry Reid’s quarter million.

Well, Harry Reid’s numbers leave much to be desired, but maybe he is right that millionaire business owners do not create jobs.

What does the IRS have to say about this? Millionaire tax filers earn a total taxable income of $623 billion, on which they pay the highest average rate (30 percent) of any tax bracket. (Either Warren Buffet’s secretary has an incompetent tax accountant or Buffet has some pretty juicy tax breaks. I think the latter is more likely). A 1.9 percent tax surcharge on million-dollar-earners would yield $11 billion, assuming those shifty millionaires take no evasive action to avoid the tax.